The Prostitution Tax Deduction

April 15, is technically the due date for paying your income taxes in the United States.  However, since it falls on a Sunday this year, I believe Americans have until Tuesday, April 17, to file their returns. Why not Monday?  I have no idea, but there is a lot about my government that I am clueless about.  Some things because I really have no interest in learning more about them, and some things because they really make no sense to me, like the following news item.

Yesterday, Forbes reported on interesting tax deductions taxpayers have tried to claim over the years.  Included in these was of course, prostitution.  However, the extra little tidbit in the news related to this story was how some of the agents in the U.S. Secret Service were accused yesterday of hiring prostitutes while in Columbia in advance of President Obama’s visit.

If you looked at my post on April 11, 100 Countries and Their Prostitution Policies, you may have clicked on the link I provided taking you to the survey where you would have seen that prostitution is legal in Columbia.  Prostitution also has “limited legality” in the U. S.  So then, why the big fuss?  Are the Secret Service men planning on deducting fees paid to prostitutes from their taxes next year? Is it because it is assumed that they are using public funds to pay for these women?  And, if they are using public funds, then when their expense report is reviewed can’t these deductions simply be disallowed? Or, is it because they got caught when a prostitute claimed that she hadn’t been paid and it made us look bad?

Come on, America, for my entire life I have read about sexually naughty behavior by our politicians. Why does this still get headlines in 2012?  Do we really care? And, if so, why?  That is a much more interesting story.  After all, aren’t our representatives supposed to reflect their constituents?  In my opinion, they do.

If you are interested in some of the more interesting appeals to deduct money paid to prostitutes as an expense on ones tax return, below are a few cases reported by Forbes.

Ralph Louis Vitale, Jr., in 1999, claimed on his tax return that he was in the business of writing about prostitution. He paid prostitutes in cash. Still, he kept a detailed journal of his numerous research visits. Vitale submitted his manuscript to a vanity publisher, paying $4,375 to publish it. All tolled, after he received $2,600 in royalties, the publisher went bankrupt. The IRS said this was just a hobby and disallowed Vitale’s deductions. Vitale went to Tax Court, which ruled he did have a profit motive. Still, no receipts, he got no deduction. At least the court didn’t impose penalties, ruling that Vitale made a reasonable attempt to comply with the tax laws.

United States v. Hoskins, states that Mr. and Mrs. Hoskins ran “Companions,” a Salt Lake City Escort service. Although they filed tax returns, they failed to report over $1 million in income. That eventually led to criminal charges. One of the disputed items was fees paid to prostitutes, but the court seemed to allow them as deductions.

And, my personal favorite is Halby v. Commissioner.  In 2009 a 78-year-old tax lawyer claimed medical deductions for therapeutic “treatments” from prostitutes. He deducted pornography too. The total: a whopping $65,934. The Tax Court had an easy time backing the IRS. No doctor had prescribed this cure, which in any case was illegal.

I expected more from the 78-year-old lawyer.  He should have been able to argue the case in his favor citing the U.S. “limited legality” policy on prostitution.




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